Crypto exchange AAX suspends withdrawals • Hacker News Board

Re: Crypto exchange AAX suspends withdrawals

#561

Post by HDThoreaun » Mon, Nov 14, 2022, 5:48 PM UTC

overgard wrote: post #547

Can someone actually explain what the intrinsic use of coins is supposed to be (aside from speculating). Their value is so volatile they suck as actual currency, not to mention if you were the guy that spent 10,000 bitcoins on a pizza back in the day you'd feel pretty stupid about your 300 million dollar pizza. They're not even particularly good for illegal purchases -- you have to know what you're doing to keep your…

I can see some value in ethereum's VM. The upside there is a bootstrapped cloud that every computer can join when not in use, unlocking tons of value that currently is just sitting around. Seems reasonable to believe that 10 years from now ML training/other compute intensive async tasks might be done via the ethereum VM.

Probably would be easier to just do this via a centralized organizer, but getting enough buy in to actually attract users might be difficult. Ethereum already has it.

Re: Crypto exchange AAX suspends withdrawals

#562

Post by herval » Mon, Nov 14, 2022, 5:48 PM UTC

overgard wrote: post #547

Can someone actually explain what the intrinsic use of coins is supposed to be (aside from speculating). Their value is so volatile they suck as actual currency, not to mention if you were the guy that spent 10,000 bitcoins on a pizza back in the day you'd feel pretty stupid about your 300 million dollar pizza. They're not even particularly good for illegal purchases -- you have to know what you're doing to keep your…

Volatility aside, stuff like Bitcoin _is_ already used for payments, albeit in a much lower volume than the crypto proponents wish it would be. I pay contractors now and then with BTC, particularly in South America and Africa, and works MUCH better than SWIFT (even if I have to convert from USD to BTC and they have to convert from BTC to whatever on their side).

Projects like Ripple also have their use - it's mostly a replacement for SWIFT & similar systems (you'd be surprised by just how fragile these interbank systems are).

Some countries are implementing their own "digital currencies" as well (notably China), and they may end up being some flavor of crypto currency (although a public blockchain is not mandatory for these cases - see the example of PIX in Brazil, which works incredibly well without any public chain shenanigans).

So yea, there's value on the whole thing, but the amount of fraud, money laundering and flat out scams (in particular now that mainstream VCs are propping up the entire system) is really too big of a downside to ignore.

Re: Crypto exchange AAX suspends withdrawals

#563

Post by bmmayer1 » Mon, Nov 14, 2022, 5:49 PM UTC

LawTalkingGuy wrote: post #476

bmmayer1 wrote: post #219

Earlier quoted context omitted.

This. If an exchange cannot 1:1 fund withdrawals it is not an exchange, it's a ponzi scheme. Full stop. All real exchanges should be releasing evidence of 1:1 backed customer deposits ASAP like Coinbase has. And if they don't, it should be considered a canary of systemic risk.

Until recently all crypto exchanges had to be scams . They can only profit by selling/loaning customer funds or by trading with a dishonest advantage by being the house. If an exchange was profitable, and they all were, it was because it was a scam. This is the same analysis that shows that Tether is a fraud. If they took a dollar for every dollar token sold and then paid to store those dollars as collateral they'd b…

Not necessarily -- you can create a profitable exchange by having a standard taker fee or commission. That's how exchanges have made money since the dawn of time and there's nothing wrong with it.

The issue with FTX etc is that they didn't segregate their revenue model from their customer accounts. That's a no-no not only from a legal perspective but from a risk management perspective.

Re: Crypto exchange AAX suspends withdrawals

#564

Post by bmmayer1 » Mon, Nov 14, 2022, 5:50 PM UTC

thr0wawayf00 wrote: post #453

bmmayer1 wrote: post #219

Earlier quoted context omitted.

This. If an exchange cannot 1:1 fund withdrawals it is not an exchange, it's a ponzi scheme. Full stop. All real exchanges should be releasing evidence of 1:1 backed customer deposits ASAP like Coinbase has. And if they don't, it should be considered a canary of systemic risk.

Problem is that exchanges are getting caught fudging their "proof-of-reserve" reports. Crypto.com just got called out for "accidentally" sending $400M to a rival exchange that used the balance to prop up their reserve reports. It's becoming a joke at this point. https://www.benzinga.com/fintech/22/11/29692377/crypto-com-r...

Yes and no. That's why third party auditors exist. It's not like you're just asking people to trust your bank balance screenshots.

Re: Crypto exchange AAX suspends withdrawals

#565

Post by legitster » Mon, Nov 14, 2022, 5:51 PM UTC

overgard wrote: post #547

Can someone actually explain what the intrinsic use of coins is supposed to be (aside from speculating). Their value is so volatile they suck as actual currency, not to mention if you were the guy that spent 10,000 bitcoins on a pizza back in the day you'd feel pretty stupid about your 300 million dollar pizza. They're not even particularly good for illegal purchases -- you have to know what you're doing to keep your…

Theoretically, the coins also act as an ownership share in their respective technology. Or are a transaction unit for it. You could have a deed to something on a blockchain instead of at a title company.

But to your point, if 99.99% of the technology the coins represent is... more coins? Then yeah, it's a big ol' Ponzi scheme.

I always thought it would be interesting to have a coin specifically based on its demand. You have to post something for sale in that coin for a new coin to be minted. So the coin only propagates so long as there is actual demand for it.

Re: Crypto exchange AAX suspends withdrawals

#566

Post by vkou » Mon, Nov 14, 2022, 5:51 PM UTC

dragontamer wrote: post #542

yewenjie wrote: post #497

How likely is this cascade to reach Binance?

How much of Binance's $500-million worth of FTT did they manage to salvage before FTT / FTX went bankrupt? We already know that Binance had at least one giant pile of FTT, as they tweeted about this before FTX / FTT troubles started to go down. In some sense, it has already reached Binance. The real question is whether or not Binance has enough funds to weather that kind of storm.

I doubt anyone at Binance would lose any sleep over a 500 million hole in their balance sheet. (Because I believe that Tether is, was, and will be significantly undercapitalized.)

The only thing that can unravel Binance and Tether is a big enough bank run.

Re: Crypto exchange AAX suspends withdrawals

#567

Post by jankyxenon » Mon, Nov 14, 2022, 5:51 PM UTC

kranke155 wrote: post #551

overgard wrote: post #547

Can someone actually explain what the intrinsic use of coins is supposed to be (aside from speculating). Their value is so volatile they suck as actual currency, not to mention if you were the guy that spent 10,000 bitcoins on a pizza back in the day you'd feel pretty stupid about your 300 million dollar pizza. They're not even particularly good for illegal purchases -- you have to know what you're doing to keep your…

When Ethereum/ another crypto VM becomes fast enough, decentralised applications will be the new iPhone - stuff we can’t imagine will be built there. As far as NFTs, 90-99% of the activity is nonsense, fraud and money laundering, but there are real artists in the space. Whether that’s satisfactory for you is really a matter of perspective.

The use case is "stuff we can't imagine"?

Re: Crypto exchange AAX suspends withdrawals

#568

Post by gruez » Mon, Nov 14, 2022, 5:51 PM UTC

shmatt wrote: post #543

dhruval wrote: post #515

Not super knowledgeable on this but Decentralized exchanges exist why are they not more widely used by the crypto community?

BlockFI was offering 8.5% APY on deposits. FTX was offering 8% A true exchange, where you just buy and sell, will never pause withdrawals because they won't be acting with these ponzi-like methods A decentralized exchange won't give you free money, so less people will use it. Also the same with a centralized exchange offering you 0% APY and full liquidity at all times. You could build one, but will people sign up?

>A true exchange, where you just buy and sell, will never pause withdrawals because they won't be acting with these ponzi-like methods

While operating a ponzi scheme in addition to an exchange certainly wouldn't help, even ponzi-less exchange is still susceptible, if they offer leverage.

>You will have some customers who owe you money, and others whom you owe money. You will be like a bank. If everyone to whom you owe money demands their money back at once, you will need to get the money back from the ones who owe you money, which might be hard. (You might not have a contractual right to demand the money back right away, or it might be rude and bad for business, or you might have to liquidate them to get the money back and that would blow up the value of your collateral.) In broad strokes this is a reasonable description of what happened to Bear Stearns, a brokerage that financed its customers’ positions. If you are a crypto exchange that provides leverage, then you are probably bank-like enough for a run on the bank.

https://www.bloomberg.com/opinion/articles/2022-11-08/binanc...

Re: Crypto exchange AAX suspends withdrawals

#569

Post by pclmulqdq » Mon, Nov 14, 2022, 5:51 PM UTC

kranke155 wrote: post #551

overgard wrote: post #547

Can someone actually explain what the intrinsic use of coins is supposed to be (aside from speculating). Their value is so volatile they suck as actual currency, not to mention if you were the guy that spent 10,000 bitcoins on a pizza back in the day you'd feel pretty stupid about your 300 million dollar pizza. They're not even particularly good for illegal purchases -- you have to know what you're doing to keep your…

When Ethereum/ another crypto VM becomes fast enough, decentralised applications will be the new iPhone - stuff we can’t imagine will be built there. As far as NFTs, 90-99% of the activity is nonsense, fraud and money laundering, but there are real artists in the space. Whether that’s satisfactory for you is really a matter of perspective.

That was the premise of Solana, but it turns out speed in a distributed system needs some form of centralized coordination.

Re: Crypto exchange AAX suspends withdrawals

#570

Post by dibt » Mon, Nov 14, 2022, 5:51 PM UTC

dragontamer wrote: post #546

shmatt wrote: post #543

Earlier quoted context omitted.

BlockFI was offering 8.5% APY on deposits. FTX was offering 8% A true exchange, where you just buy and sell, will never pause withdrawals because they won't be acting with these ponzi-like methods A decentralized exchange won't give you free money, so less people will use it. Also the same with a centralized exchange offering you 0% APY and full liquidity at all times. You could build one, but will people sign up?

> A true exchange, where you just buy and sell, will never pause withdrawals because they won't be acting with these ponzi-like methods Coinbase is also offering APY on its deposits through Coinbase Rewards, as does Binance. This "true exchange" sounds like the no-true-Scotsman fallacy. Literally no one does what you claim. Everyone in the cryptocoin world is doing this "staking" == crappy loans / bonds business.

>Coinbase Rewards

You are referring to staking. FTX was giving a static yield on deposits. The funding for this came from their marketing budget. Very different from what Coinbase does.

>"staking" == crappy loans / bonds business.

Staking is not a loan. It is a component of proof of stake networks to maintain security. Coinbase provides stacking services, but all they do is pass the yield onto the customer while taking a cut for the resources required for staking (e.g. AWS bill).

Some token networks may market a mechanism as "staking" when it's just a way to keep people from selling. That's a different topic.